In a crucial move, the G20 today agreed that the IMF should forward the new Precautionary and Liquidity Line to provide, on a case-by-case basis, increased and more flexible short-term liquidity to countries.
Their communiqué also says, “We also support the IMF in putting forward a single facility to fulfil the emergency assistance needs of its members.”
Afterwards, a relaxed and confident looking Prime Minister, Dr Manmohan Singh, said that the while solving the Euro zone crisis was of great importance, it was up the Europeans to put their house in order as soon as possible. “The crisis in the Euro zone is a grave threat to stability."
He told journalists at a post-Summit press conference that the latest actions of Greece and Italy to act in a manner consistent with global stability had given the world a “breathing space”.
The Europeans, he said, have got themselves into this mess because while they had a monetary union they did not have a mechanism for coordinated fiscal action.
In response to a question, he said he had mentioned this to the German Chancellor, Ms Angela Merkel, who said she agreed.
“Europe does not have a lender of last resort,” said the Prime Minister but needs one as it will inspire confidence in the global financial markets.
The Prime Minister expressed satisfaction that the G20 had agreed to expand the resources available with the IMF. The exact mechanism will be discussed by the finance ministers in December.
Meanwhile, the IMF now has to monitor Greece and Italy. Italy has agreed to have a quarterly audit of its performance and Greece may also do so soon.
The G20 Communiqué has also reiterated its commitment to all the old items like energy, environment, corruption, tax administration and so on. The Prime Minister called it an “essay in persuasion” meaning thereby that it would all take time.
Overall, the mood in the Indian delegation was one of relief that a rather tiresome chore had been performed as required by India's membership of the G20.